Developing Markets Little Hit By Turmoil: World Bank

Source : The Business Times,October 23, 2007

Central bankers see need for multilateral talks to strengthen risk management

(WASHINGTON) The impact of recent turbulence in financial markets on developing countries has been limited, and global economic growth remains strong, the World Bank said on Sunday.

Conferring: Mr Zoellick (left) with Mr Paulson at the World Bank's policy-setting Development Committee meeting on Sunday. Mr Zoellick, the bank's new president, faces a stiff challenge as he develops a new strategy

Finance ministers and central bankers agreed at weekend meetings that while the global economy was on the mend after recent turbulence, they will need to pay close attention to prevent future crises from erupting.

They also said the turmoil demonstrated how interconnected economies across the world are and the need for multilateral discussions to strengthen risk management.

'The consensus was that markets are better than in August,' US Treasury Secretary Henry Paulson told reporters. 'It has been slowly improving, but it is going to take awhile.'

The World Bank called on donor governments to meet their commitments to boost aid for development and said countries with fast-growing economies and mounting currency reserves could bring new resources to the effort.

In a statement, the bank's policy-setting Development Committee said its members agreed that more support for the inclusion and empowerment of the poorest countries, especially in sub-Saharan Africa, and more engagement in conflict-afflicted countries are key.

The bank also should help developing countries deal with the causes and impacts of climate change, it said.

The committee session followed a meeting of the bank's sister institution, the International Monetary Fund. In a lecture sponsored by the IMF, former US Federal Reserve chairman Alan Greenspan warned that rising protectionism could undermine the ability of the US to deal with large deficits.

'If the pernicious drift toward fiscal instability in the United States and elsewhere is not arrested and is compounded by a protectionist reversal of globalisation, the current account deficit adjustment process could be quite painful for the United States and our trading partners,' he said.

Committee members welcomed the commitment by the bank's new president, Robert Zoellick, to develop a new strategy for the bank. Mr Zoellick, who took over on July 1, has called on the developed countries to 'translate their words from summit declarations into serious numbers' and contribute to the bank branch that makes low-interest loans to poor countries. He hopes to raise US$33 billion by early 2008.

He said South Africa had already set a good standard by pledging a 30 per cent boost in its contribution to the loan facility.

At a news conference, Mr Zoellick and the head of the IMF, Rodrigo de Rato, said they were exploring ways the fund could work on reducing debt for Liberia. 'This is a country that is helping itself and deserves to be helped by the international community,' Mr de Rato said.

In February, the US forgave US$358 million that West African country emerging from civil war owed it and pushed for further action at the IMF-World Bank meetings.

Liberia's inherited debt to international institutions totals US$1.6 billion, including US$740 million to the IMF. Its total international debt is US$3.7 billion.

Mr Zoellick's strategy faces a stiff challenge because in recent years, wealthier countries have preferred to channel their aid to poor countries directly through their development agencies or through foundations that specialise on issues such as malaria.

South African Finance Minister Trevor Manuel welcomed Mr Zoellick's emphasis on helping to overcome poverty and promote sustainable growth in poor countries, particularly those in sub-Saharan Africa.

The strategy would have the bank fight poverty, especially in Africa, help countries emerging from wars and promote regional cooperation to combat disease and climate change.

Based in Washington, the 185-nation World Bank lends US$24 billion a year for projects in the developing world such as building roads, schools and health clinics. But its role as a lender has been declining as middle-income countries have access to financing from other sources. -- AP